Sections 378W and 378X explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 378W requires every Producer Company to have a full-time Chief Executive, appointed by the Board from outside its Members, who sits on the Board ex officio and runs day-to-day affairs under the Board's control. Section 378X requires a whole-time secretary, who must be a member of the Institute of Company Secretaries of India, once average annual turnover exceeds five crore rupees in each of three consecutive financial years.
Every Producer Company must have a full-time Chief Executive, appointed by the Board from persons other than Members (section 378W(1)). He is an ex officio director who does not retire by rotation. He manages the company under the Board's superintendence and is accountable for its performance. A company with average annual turnover above five crore rupees (or a prescribed amount) in each of three consecutive years needs a whole-time secretary who is a member of the ICSI. Default attracts Rs 100 a day, up to Rs 1 lakh, with a reasonable-efforts defence. The Bill 2026 does not amend these sections.
If you are unsure whether your company already falls under either section, our legal consultation service can check the articles and the turnover figures.
The two sections at a glance
| Section | Subject | Key point |
|---|---|---|
| 378W | Chief Executive | Full-time; non-Member; ex officio director; wide management powers under Board control |
| 378X | Secretary | Whole-time, ICSI member, once average turnover exceeds Rs 5 crore in each of three consecutive years |
Section 378W: the Chief Executive
| Sub-section | Rule |
|---|---|
| (1) | Every Producer Company has a full-time Chief Executive, by whatever name called, appointed by the Board from amongst persons other than Members |
| (2) | He is ex officio director of the Board and does not retire by rotation |
| (3) | Save as the articles provide, qualifications, experience and terms of service are as the Board determines |
| (4) | He is entrusted with substantial powers of management as the Board may determine |
| (5) | Without limiting (4), he may exercise the functions in clauses (a) to (k) |
| (6) | He manages the company under the general superintendence, direction and control of the Board and is accountable for the performance of the company |
Why a non-Member. The Chief Executive is a professional manager, kept separate from the elected Members. The Board appoints him under section 378R(2)(e) and supervises him under clause (f); see section 378R on the Board's powers. The articles must state the manner and terms of his appointment (section 378G(3)(c)).
The functions in sub-section (5). He may:
- do routine administrative acts and manage day-to-day affairs;
- operate bank accounts, or authorise a person to do so, subject to the Board's general or special approval;
- arrange safe custody of cash and other assets;
- sign documents as authorised by the Board;
- maintain books of account, prepare annual accounts and their audit, and place the audited accounts before the Board and the AGM;
- give Members periodic information on operations;
- make appointments to posts under powers delegated by the Board;
- help the Board in goals, objectives, strategy, plans and policy;
- advise the Board on legal and regulatory matters on proposed and ongoing activities and take necessary action;
- exercise powers needed in the ordinary course of business; and
- discharge other functions delegated by the Board.
Other duties under the Chapter. The Chief Executive gives notice of Board meetings and faces a Rs 5,000 penalty if he does not give the required notice (section 378V(3)); see sections 378U and 378V. A committee cannot be given the Chief Executive's powers (section 378U(1) proviso), and the Chief Executive or a director must be on each committee (section 378U(2) proviso).
Section 378X: the whole-time secretary
| Sub-section | Rule |
|---|---|
| (1) | A Producer Company with average annual turnover exceeding five crore rupees, or such other amount as may be prescribed, in each of three consecutive financial years shall have a whole-time secretary |
| (2) | No individual is appointed as whole-time secretary unless he is a member of the Institute of Company Secretaries of India constituted under the Company Secretaries Act, 1980 |
| (3) | If the company fails to comply with (1), the company and every officer in default are liable to a penalty of Rs 100 for every day of default, subject to a maximum of Rs 1 lakh |
| Proviso | No penalty if it is shown that all reasonable efforts to comply were taken, or the company's financial position was such that it was beyond its capacity to engage a whole-time secretary |
How to read the turnover test. The wording is "average annual turnover exceeding five crore rupees ... in each of three consecutive financial years". The text does not define turnover in the section. Where the Central Government has prescribed a different amount, that amount applies instead; check current rules before relying on the figure in the section. A company that crosses the threshold has to fill the post; the section does not give a separate grace period.
Secretary versus Chief Executive. The two posts are different. The Chief Executive manages the business; the secretary handles the company's statutory and secretarial work, and must hold the ICSI qualification. The Chief Executive's functions include advising the Board on legal and regulatory matters, but that advice does not replace the secretary once section 378X(1) applies. For Board records, see our legal consultation service.
A worked example
A Producer Company of cotton growers has a turnover of Rs 6 crore, Rs 7 crore and Rs 8 crore in three consecutive financial years, so the average annual turnover is above five crore rupees for the period. It has a full-time Chief Executive, recruited from outside its Members, who sits on the Board ex officio. Because of the turnover test, it must also appoint a whole-time secretary who is an ICSI member. If it does not, the company and each officer in default may face Rs 100 a day, capped at Rs 1 lakh, unless it can show reasonable efforts or that it could not afford to engage one.
Proposed change
The Corporate Laws (Amendment) Bill, 2026 amends other provisions of Chapter XXIA (sections 378P, 378Q, 378Y, 378ZA, 378ZF, 378ZM and 378ZS), but our search found no clause amending section 378W or 378X. The Bill is pending and is not law.
Need help with senior appointments?
Choosing a Chief Executive, setting terms and deciding when a whole-time secretary is required all depend on the articles and the company's turnover. Our legal consultation team can help you check the appointment rules and draft the terms the Board will approve.
Key takeaways
- Every Producer Company needs a full-time Chief Executive who is not a Member.
- He is an ex officio director and does not retire by rotation.
- He works under the Board's control and is accountable for performance.
- A whole-time secretary who is an ICSI member is required above Rs 5 crore average turnover for three consecutive years.
- Default carries Rs 100 a day, up to Rs 1 lakh, subject to a reasonable-efforts defence.
Read next
- Sections 378U and 378V: committees and Board meetings
- Section 378R: powers of the Board
- Sections 378S and 378T: general meeting matters and director liability
- Annual compliance for a Producer Company
Disclaimer: Based on the Companies Act, 2013 as amended up to 1 April 2021 (official consolidated text), read with later developments noted in the article; proposals in the Corporate Laws (Amendment) Bill, 2026 are pending and not law as on 30 September 2026. Verify current notifications and rules before acting.